How I Learned to Stop Worrying and Love the Market Part 1: Naivete

Let me tell you something you already know. The world ain’t all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain’t how hard you hit; it’s about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That’s how winning is done. Now, if you know what you’re worth, then go out and get what you’re worth. But you gotta be willing to take the hit, and not pointing fingers saying you ain’t where you are because of him, or her, or anybody. Cowards do that and that ain’t you. You’re better than that! – Rocky Balboa

I sip from a freshly-brewed Starbucks Verona coffee. The over-roasted pungent taste floods my throat in a simple moment; its job is done. Its time. I place the coffee on my desk, and look up at my three 24 inch monitors full of charts, depth of markets, and watch lists. It’s early. The glare from the white charts hurts my eyes in the dimly lit room, and I wince as they adjust. I look at it all, taking in one chart after another. I click around, open more charts, and write down notes. I spend at least half an hour writing notes about what my plan is, what my ideas are, and what instruments I feel I should focus on. The house is so quiet – the sound of the lead pencil scraping across the paper is all that can be heard. I sit back, take a deep breath, and decide that I am ready. I feel energy and excitement, but am relaxed. It feels lonely at this time in the morning, but it’s become a time of solace for me. Every morning, my ritual involves getting up early and preparing myself, mentally, emotionally, and spiritually. I am preparing myself for trading. I am actually ready to take part. I never thought I would reach this point in my trading…

This might read as a mundane morning experience, but it is one that I have the strongest gratitude for in my life, because it wasn’t easy to get to this place. To be able to sit down and look at the markets. To be ready to become a live agent; a participant in what will unfold. And to do so with a plan, with confidence, and with a better chance than ever to close the day positive rather than negative. It was truly worth the struggle. The reality is that this is a new experience for me, because over the past 6 months something changed – I started to see.

I started my hobby career in trading during 2009. Like most retail traders, I was picking up books on technical analysis, trying to buy ETFs or stocks, and usually being the last man holding the bag before price went strongly against me. I invested $10k in some ETF’s, and on the day I put the “investments” on, price seemed to turn completely against me. It was as if the friendly face of the market was welcoming me with a warm smile and gentle embrace – “Come, come join us. Place your money there and take a seat.” It seemed very cordial placing my first trade, until I saw how much I was down just a second or so later – it was all red; blood red. I don’t recall how much I was in the hole, but my PnL was red, and it never went green for the rest of the day. Right before the close, I was down quite a lot – I hadn’t cratered my investment capital, but it was bad. I had lost money before sure, perhaps a hundred here or there. But I had never lost a thousand or a couple of thousand in a single day. Yet here I was, only a few hours after being beguiled by Mr. Market Maker, and taking his kind seat – sweating bullets, and ready to become a “jumper”. “Maybe I should close the trade now?” I mulled over out loud I am sure. A certain level of insanity had become me now. “But shit, that’s a $2500 loss?” “Oh my god, what have I done?” I continued to sweat bullets until the bell rang, and I was left sitting in the reality of knowing I had lost at least $2500 or so. But my mind told me that I had probably lost it all.

I felt sick. I definitely remember looking at my monitor, and I could see the simple moving average- that price was above it. In fact, it had only just closed above it, and I had read once that this was a good time to buy. Had these authors blatantly lied? Or was I just stupid? I continued a deep inquiry, leaning towards a conclusion that the authors had been charlatans. It is fair to say that I didn’t really see the chart. I saw the “candle,” and I saw the moving average. I had little idea what everything else meant. I could see the different types of candles, and those lines on either end with different lengths. In truth, I did not know what I was looking at. It was my first trade, and I had bought literally at the last price before price collapsed. I felt shame, stupidity and sadness. I attempted to play in the adult playground, and I got knocked around and left it bruised and shaken.

I didn’t sleep at all that night. I resolved to pray to the market Gods, to all Gods and Deities: “Please let me get my money back. I promise not to be so stupid next time”. It’s honest to share that this first trade affected me on a deep level. Losing money for me has been a very tough battle to contend with. Over the years since 2009, there have been far worse experiences, and much larger losses. But the process of managing oneself has become an ongoing journey, in and of itself. I never knew psychology was so important.

The following morning, I said little to anybody, and watched every second slowly tick from 8AM till 8:30AM – market open. I had no idea how to look at pre-market moves, so I was waiting for the opening bell. I also remember looking at the chart and feeling frustrated that I had followed the “advice,” but was now living with the consequences of a bad decision. When the bell rang, my trade had recovered, and I was down only around $1k right from the bell. I watched the pnl and the chart, and I kept seeing the candle go green, but my pnl remained down $500. Looking at what was going on, I was manic, and paralyzed with making a decision. In the end, I took a $700 approximate loss, while price rallied for the next week or so. I remember this all, because this was a deeply formative process for me – I had pinned so many hopes and dreams on being able to make money as a trader, and I thought that it was going to be easy. It clearly wasn’t.